A Little Help From His Friends

Uriya Shavit - Ha'aretz - February 23, 2001

Without delving too deeply into the charges against American billionaire Marc Rich, a large number of prominent Israelis helped persuade President Clinton to pardon him. Now Clinton is in trouble and the Israelis are making excuses.

Last week, federal prosecutor Mary Jo White announced the launching of a criminal investigation against former President Bill Clinton. White intends to find out exactly why, on the last day of his presidency, Clinton granted pardons to Jewish billionaire Marc Rich and his business partner, Pincus Green. She suspects that there is a link between these pardons and the contributions made by Rich's ex-wife to Clinton and the Democratic Party. Clinton vehemently denies the accusations.While Clinton's eight years in the White House were awash in scandals, this one is particularly threatening. Without his presidential immunity to fall back on, Clinton is vulnerable. The Republicans and the American legal authorities are determined to pursue the investigation, motivated not only by animosity for Clinton, but also by anger toward Rich.

Until the early 1980s, Rich was the great American success story. He was a Jewish immigrant who, by dint of his own hard work, intuition and a healthy dose of chutzpah, transformed himself into one of the world's biggest traders in oil and metals. Then everything changed. Rich was charged with major tax violations, fled to Switzerland with Green and avoided every summons to appear in court. He went from being an American hero to an enemy of the state. To many, Clinton's grant of a pardon was a stunning and incomprehensible act.

This U.S. affair also has an unfortunate Israeli aspect to it. Marc Rich is one of the biggest contributors to Israeli institutions. Over the last few months, Avner Azulai, his representative in Tel Aviv, tried to persuade senior political officials to assist in Rich's bid to obtain a pardon. His efforts paid off. The call went out from Jerusalem to Washington, and that's all it took to involve the State of Israel's good name in this unseemly imbroglio.

See no evil, hear no evil

Four prominent Israeli politicians - Prime Minister Ehud Barak, Knesset Speaker Avraham Burg, Foreign Minister and Public Security Minister Shlomo Ben-Ami and Regional Development Minister Shimon Peres - were involved in the effort to secure a pardon for Rich. Not one of the four bothered to find out the real nature and extent of the charges pending against him in the U.S. Had they done so, they would have discovered that not only was Rich suspected of having committed the most serious tax violations in U.S. history, but that these charges involved highly sensitive issues for the State of Israel: the oil market and trade with Iran.

Barak did his part in a phone conversation with Clinton. Says Barak's media advisor, Gadi Baltiansky: "As an incidental comment in a phone conversation on another subject that the prime minister had with President Clinton several weeks before the end of the president's term, the prime minister mentioned Mr. Rich's contribution to the State of Israel, to its social welfare as well as on matters of security and intelligence."

Did Prime Minister Barak check into the nature of the charges against Rich before making those comments to Clinton?

"The prime minister was not well-versed in the details of Rich's case, but he knew that the question of his pardon was on Clinton's desk. Therefore, he deemed it appropriate to share with the U.S. president some general information about the man's contribution to the State of Israel."

Burg wrote a letter to Clinton. The Knesset Speaker's spokeswoman, Ayelet Frisch, explains: "Israel Singer, Chairman of the World Jewish Congress, wrote a letter to Burg on behalf of American Jewry. In it, Singer asked Burg to write to Clinton in support of a pardon for Mr. Rich. Burg immediately asked what the background to the pardon request was, but wasn't told about the charges of tax evasion or ties with Iran. All Burg was told was that Rich had gotten into some trouble. Exactly what kind of trouble wasn't explained ...

"Moreover, Burg was told that the letter he was being asked to write for Rich would be part of a group of appeals from officials in economics, politics and the Israeli defense establishment. Burg was familiar with Rich from his tenure as chairman of the Jewish Agency. The appeal to Burg arose from Rich's involvement in philanthropic activity for charitable organizations in Israel and in the American Jewish community."

That's all it takes to get a recommendation for a pardon from the Knesset Speaker?

"As soon as Singer approached Burg and said that Barak and Ben-Ami were also pitching in, Burg said he was ready to help. When the request came from Singer along with the information about which other people in Israel were writing letters to Clinton, Burg was persuaded."

There's no one in the Knesset who's as familiar with the Internet as Burg. How complicated could it have been to do a search for information on Rich's alleged offenses before deciding whether to accede to the request for help?

"As Knesset Speaker, he has examine things himself, but he is also bound to rely on others."

Ben-Ami sent a letter to Clinton in which he described Rich's contribution to the peace process and the Jewish people. Among other things, he told Clinton: "I am unfamiliar with the legal details related to Marc Rich's case. I am speaking here only of his contribution to the Jewish people, to social projects and projects related to the peace process."

If the Public Security Minister wasn't familiar with the legal details, why didn't he bother to find out about them before lending a hand to the pardon effort?

Ben-Ami spokesman Moshe Debby: "We have nothing to add."

Shimon Peres' office released the following statement: "In 1995, when he was foreign minister, Shimon Peres appealed to large international organizations and individuals in the field of world trade, including Marc Rich, then the owner of the largest commodities company in the world, with a request for assistance in forging trade relations between Israel and the rest of the Middle East. At the time, Rich's company was the only one that agreed to help in this area and to provide guarantees for this trade. In order to promote this issue, Rich asked Peres to help him obtain the freedom to travel in the world. It was in this context that Peres contacted the American ambassador regarding Marc Rich."

Peres did not appeal directly to President Clinton, but to the U.S. ambassador in Israel. His motive was different than that of his colleagues: While they justified their efforts on Rich's behalf by enumerating his contributions to the Jewish people, Peres was moved to help Rich because of his contribution to the establishment of the "New Middle East."

Did Mr. Peres know the nature and extent of the charges against Mr. Rich? Did he seriously look into the matter?

Peres spokesman Yoram Dori: "Minister Peres knew about the great contribution that Marc Rich had made to the State of Israel. He knew that Rich was the only one who helped Israel during that period."

A prominent right-wing politician who put in a good word for Rich with Clinton was Jerusalem mayor Ehud Olmert. Olmert's office issued the following statement: "The mayor believes that Rich was deserving of a pardon. His many contributions to Jerusalem over the last 20 years were a boon to the city and its residents. His contributions to the city totaled $21.6 million." No answer was provided to the question of whether Olmert had given serious consideration to the charges against Rich.

Wunderkind of the oil business

Marc Rich was born in Antwerp in 1934 as Marc Reich, the only child of a wealthy Jewish family. In 1942, his parents fled to France, and from there to the United States. The family settled in Kansas City, Missouri, where Marc's father, David, ran a jewelry store. Marc was sent to public school and did not excel in his studies. He was in the Boy Scouts and spent most summer vacations at a camp in the Ozarks. In a 1994 profile in Playboy Magazine, writer Calvin Trillin, a former bunkmate, recalled that Marc was "the quietest kid in camp."

The family moved to Mount Vernon, a New York suburb, in 1950, and David Rich began manufacturing canvas bags. The Korean War was on and the army needed his merchandise; the business thrived. He took his son out of public school in Queens and enrolled him in a prestigious Manhattan private school. After high school, Marc studied business administration at New York University.

In his second year of college, Rich decided that the academic life wasn't for him; he wanted to get out and start working. An acquaintance of his father, a trader at Philipp Brothers, got him a job in the company's mailroom. Philipp Brothers was run by German Jewish immigrants who appreciated hard work when they saw it. Rich's employers took an instant liking to him.

A 1984 story on Rich in Fortune Magazine charted his meteoric rise from mail clerk to top executive. Rich was apprenticed to a senior trader and assisted him in deals involving tin and manganese. His talent was first revealed when he set his sights on mercury, which is used in the manufacture of explosive materials, among other applications. When Rich was becoming an expert on mercury, the market for it was still limited and prices were low. But it wasn't long before mercury prices soared.

In 1966, he married Denise Eisenberg, an almond-eyed beauty from New England and the daughter of Jewish immigrants. According to Playboy magazine, the couple was a study in contrasts: Marc was intently serious, while Denise loved the world of glamour and dreamed of being a pop star.

After he married, Rich was appointed director of Philipp Brothers' Madrid office. In the mid-1960s, several developing countries began selling oil to independent traders. Marc Rich recognized the potential of this emerging market. Together with his friend Pincus Green, a Brooklyn-born Jew who lived in Switzerland, Rich began purchasing oil on behalf of Philipp Brothers in Middle Eastern countries and selling it in Spain and other Mediterranean countries. His deals made Philipp Brothers one of the biggest players in the field.

In 1973, Rich's success led to his first conflict with the Philipp Brothers board. That year, Rich and Green signed an agreement to purchase large quantities of Iranian oil at a price of $5 a barrel. In 1973, that was much higher than the spot price per barrel. The senior executives at Philipp Brothers panicked and asked Rich and Green to get rid of the goods quickly. Left with no choice, they did as they were told and sold the oil for just a small profit. In October 1973, after the Yom Kippur War and the Arab oil embargo, Green and Rich realized how sharp their instincts had really been: The purchase price of a barrel of oil had risen to $13.

That episode aside, Rich and Green still brought Philipp Brothers huge profits from the oil business. By the end of 1973, they were sure that their business success would earn them hefty bonuses. They were hoping to get $500,000 apiece. That was an unprecedented sum at Philipp Brothers, where the annual salaries of the traders hovered around $100,000 (including bonuses). Rich and Green did not get their wish and subsequently decided to resign from the company. Together with three other partners, they founded a new commodities firm in Zug, Switzerland called Marc Rich & Co.

Old and new oil

The starting capital of Marc Rich & Co. was a modest $350,000, which gave the owners limited maneuvering room. But Rich and Green had an extensive network of connections and plenty of energy. The company focused on two things: metals and crude oil.

The two friends gradually chipped away at Philipp Brothers' power. For example, by 1975, they dominated copper exports in the Philippines, an area that had previously been the province of the company they'd walked out on. Fortune Magazine reported that, in 1979 and 1980, Rich's company's pre-tax income amounted to $367 million; salaries for senior traders were as high as $500,000.

The new oil crisis in 1979 proved to be Rich and Green's finest hour. Months before the crisis erupted, their keen sense of timing had prompted them to sign long-term contracts with several oil-producing developing countries such as Nigeria and Angola. The Islamic revolution in Iran and the ensuing hostage crisis enhanced their situation even more. The United States barred American companies from doing business with Iran. Marc Rich & Co. was not an American company. Desperate to find a market for their oil, the Iranians reached an agreement with the company's French representative in Tehran to buy crude oil at a convenient price.

One of the companies that found itself in trouble after the Islamic revolution was Atlantic Richfield (ARCO), the seventh largest American oil company. Khomeini's government stopped supplying oil to the company and left it with a shortfall of 200,000 barrels per day. According to Fortune, ARCO executive Bill Ariano, who knew Rich, turned to his friend in desperation. Marc Rich & Co. became ARCO's biggest oil supplier. They were charged a high fee, which they had no choice but to pay.

Rich then became interested in American-produced oil. Since 1973, the American oil market had been operating under strict regulations intended to moderate increases in oil prices. The regulations were meant to assure that small refineries would have access to "old oil" (the cheaper variety) in order to keep the big companies from dominating the market. Some traders tried to circumvent the regulations to sell "old oil" as "new oil," and make a tidy profit in the process.

The American legal authorities suspect that Marc Rich was one of those who circumvented the regulations and took in illegal profits. Rich's company is suspected of having purchased and sold barrels of oils through a series of other companies - in order to blur the true nature of the product - and to sell oil that, according to the regulations, should have been cheap, at a high price. The deception brought the company profits on the order of $105 million. According to the charges, this money was transferred to subsidiary companies in other countries and no tax was ever paid on it.

The suspicions about Rich arose in 1983, almost by chance, in the course of a criminal investigation of one of the companies that did business with Marc Rich & Co. After further investigation, then Manhattan District Attorney Rudolph Giuliani announced his intention to indict Rich and Green. They were accused of tax evasion and tax fraud; the sums involved - $48 million - were unprecedented in 1983.

A further charge against them was "trade with the enemy." The way Giuliani saw it, Rich and Green had broken the law by doing business with Iran after the embargo was imposed, even though their company was registered in Switzerland. Had Rich and Green stood trial, each faced a possible maximum sentence of 325 years in jail.

They fled the country before the indictment was even filed, moving to Switzerland with their families. Swiss law does not allow for extradition on charges of tax evasion or trade with the enemy. The strict Swiss confidentiality laws made it more difficult for the American authorities to conduct their investigation, but the indictment against them remained pending. Rich and Green were also sought by the FBI. In the popular perception, they were immigrants who made good on the American dream, but who lacked the guts to proclaim their innocence in court.

'Everything got out of control'

Rich's business suffered at first after his dramatic flight to Switzerland, but he quickly recovered. Sixteen years later, Rich is a billionaire. He divorced Denise and married Gisela, a woman 18 years younger whom he met on a ski vacation at St. Moritz.

Rich received an Israeli passport and became one of the largest contributors to Israeli cultural and medical institutions. The donations, which were generally given in secret, were transferred via two foundations - The Doron Foundation and the Rich Foundation. The Doron Foundation was established in 1981; the Rich Foundation in 1988. In Israel, both are overseen by Avner Azulai, a Lieutenant Colonel (res.) in army intelligence and former Mossadnik.

The criminal charges against Rich did not stop many distinguished institutions in Israel from accepting his money. Among other things, Rich donated $3 million for the opening of a new wing in the Tel Aviv Museum of Art. Two years ago, in response to a critical report in Ha'aretz, Museum Director Mordechai Omer wrote: "Marc Rich is a well-known and respected international businessman. He is a dear friend of the State of Israel and has been a generous philanthrophist in Israel and abroad for many years. Whatever charges there may be against him, he has never been convicted."

Rich also contributed to the Nissan Nativ studio, the Be'er Sheva Theater, the Gesher Theater, the Habima Theater, the Haifa Theater, the Khan Theater, the Cameri Theater, the Israel Philharmonic, the Cinematheque, the Israel Museum and Shaare Tzedek Hospital.

Rich visited Israel once a year, staying at the King David, where ministers and mayors regularly beat a path to his door - despite his refusal to contribute to political causes. The U.S. authorities wanted to get their hands on him while he was in Israel, but Rich had no reason to worry. The extradition agreements between Israel and the U.S. do not allow for extradition on charges of tax evasion, and the American extradition requests were denied. In Jerusalem, the red carpet was laid out for Rich.

Two years ago, Rich granted a rare interview to Ma'ariv reporter Boaz Gaon. Asked about the indictment, Rich replied: "I was successful, I was a Jew, the whole thing attracted a lot of publicity and everything got out of control. To be honest, I'm sure that we also made mistakes that added to the bad publicity we received."

If you're confident of your innocence, then why don't you return to the U.S. to face the charges, Gaon asked. "Considering the tremendous publicity the case has already gotten and the tremendous publicity we'd receive if we were to do that, it would be risky for us," Rich said. "I don't want to take that risk. I no longer think that this legal situation will be resolved. I hope it will be possible to resolve it. But I don't think it will be."

When President Clinton resolved the situation by pardoning Marc Rich, the Jewish billionaire, now 66, was convinced that, at last, he could enjoy some peace of mind. But the investigation against Clinton has put him right back in the eye of the storm. The old charges against Rich aren't going to fade from the public's memory anytime soon. The only question is what will happen to the new charges being leveled at Clinton.

'Rich never asked for anything'

In the first interview he has given since the whole Rich-Clinton affair erupted, Avner Azulai, Rich's representative in Israel and the man who organized the pardon campaign on his behalf, says that the number of requests submitted to Rich's Israeli foundations has doubled. "People heard that there's a philanthropist named Marc Rich and they're seeking his help."

Don't you see anything wrong with the fact that Rich used his generosity as leverage in obtaining character references from senior Israeli officials?

"No. Rich never asked for anything in return for his donations. There's no connection between his financial contributions and his legal case. When the decision was made to seek a pardon from Clinton, we collected character references and turned to those people who were familiar with the quiet activity that he'd done for years. None of the politicians that I approached told me no."

But some are now disavowing the letters that they sent. For example, Avraham Burg said that had he known about Rich's deeds, he wouldn't have written the letter.

"All right, that's Burg. That's not the picture I got from the politicians in terms of their support for the pardon request."

What do you know about Denise Rich asking President Clinton to pardon her ex-husband?

"I approached Denise in November and asked her to speak to Clinton. Denise hesitated initially. Marc and Denise haven't spoken since their divorce. It was a complicated divorce. They argued about money. I approached Denise and told her that it would be strange if, as the mother of his children, she wouldn't intervene on his behalf. It took much effort to convince her. Denise is a socialite and her ties with Clinton weren't for [purposes such as] this. She was concerned about her position. She was convinced in the end, and spoke to Clinton. The allegations against her are groundless, the investigation will prove that."

Why doesn't Rich speak to the press?

"I suggested several times that he give interviews, but he feels that the journalists twist his words and that seems unfair to him. There's hostility toward him in all the media reports about him."